QUOTE AND NEWS
newratings.com  Sep 1  Comment 
MILWAUKEE (dpa-AFX) - Johnson Controls (JCI) on Tuesday said it has completed the sale of its Global Workplace Solutions ("GWS") business to CBRE Group (CBG) for about $1.48 billion. GWS is one of the world's largest providers of facilities...
Motley Fool  Aug 31  Comment 
Analysts recently upgraded the stock, but is it a buy?
Automotive World  Aug 31  Comment 
Production capacity increased Start-Stop batteries for Europe produced in Burgos plant On August 30 in the early morning, the 100 millionth battery will roll off the production line at the Johnson Controls battery plant in Burgos. To meet the...
Automotive World  Aug 27  Comment 
Johnson Controls donation funds Tulane City Center, a university-led architectural program to improve New Orleans Johnson Controls stood with Tulane University to help quickly rebuild and resume classes within five months after Hurricane...
Automotive World  Aug 26  Comment 
Employees renovate room for education and recreational activities Project supports 150 refugees in the Neuplanitz housing project The world’s largest automotive battery maker is stepping up to help refugees in Zwickau, Germany. Johnson Controls...
Benzinga  Aug 24  Comment 
Piper Jaffray initiated coverage on Nantkwest Inc (NASDAQ: NK) with a Overweight rating. The target price for Nantkwest is set to $38. Nantkwest shares closed at $23.80 on Friday. Analysts at Morgan Stanley initiated coverage on Interactive...
TheStreet.com  Aug 24  Comment 
NEW YORK (TheStreet) -- Credit Suisse initiated coverage on Johnson Controls with a "neutral" rating and a price target of $49. The firm said it began coverage on the diversified technology company as it believes the stock is already...
Automotive World  Aug 17  Comment 
Further expanding manufacturing footprint in key emerging market Johnson Controls employees rolled up their sleeves this week to help Detroit students who are working with the Conservation Leadership Corps (CLC) to help create a greener city. In...
Automotive World  Aug 13  Comment 
Further expanding manufacturing footprint in key emerging market Johnson Controls plans to build a new automotive battery manufacturing facility in the city of Shenyang in northeastern China as it continues to invest in the world’s largest new...
TheStreet.com  Aug 12  Comment 
NEW YORK (TheStreet) -- Johnson Controls   was upgraded to "buy" from "neutral" at Goldman Sachs on Wednesday morning. Johnson Controls' shares should gain on increased backlog for its Building Efficiency segment, which is a comprehensive...




 

Johnson Controls (NYSE: JCI) makes car interiors and heating, ventilation, and air conditioning (HVAC) products. The company's car parts business is shrinking with the overall US automotive business (the company's automobile sales fell 34% in 2009). Although Johnson Control's automobile components sales generated 42% of 2009 total revenues, the segment lost the company $541 million for the year.

The company is relying heavily on its Building Efficiency and Power Solutions segment, both of which generated the about same amount of segment income at $400 million.

Johnson Controls is one of the few companies, other than energy companies, that is benefiting from higher electricity prices. US electricity prices increased an average of $0.31 per kilowatt hour in 2009, and higher electricity costs encourage building managers to replace their heating and air-conditioning systems with newer, more energy-efficient equipment.

Company Overview

Business Segments[1]

  • Automotive Experience (42% of net revenue): designs and manufactures automotive interiors for automobile companies such as Ford Motor Company (F), General Motors (GM) and Daimler AG (DAI). The company's Automotive Experience products include seats, instrument panels, information displays, headliners and doors. Johnson Control's Automotive Experience revenues decreased 34% in 2009, mainly due to a decrease in sales to the American big three automakers. Although the segment generates a large portion of the company's net revenue, its segment income was -$541 million.
  • Building Efficiency (43% of net revenue): makes heating, ventilation, and air conditioning (HVAC) equipment for commercial buildings. In addition to manufacturing HVAC products, Building Efficiency offers services such as energy efficiency consulting and on site maintenance and property management. The segment's income was $397 million.
  • Power Solutions (14% of net revenue): produces lead-acid automobile batteries. The company sells most of its automobile batteries to aftermarket purchasers through retail outlets like Pep Boys-Manny, Moe & Jack (PBY) and Wal-Mart Stores (WMT). The company also sells batteries to automobile manufacturers. Power Solutions also manufactures absorbent glass matt (AGM), nickel-metal-hydride and lithium-ion batteries that power hybrid vehicles. Although Power Solutions is Johnson Controls' smallest segment, it is the most profitable contributing $406 million in segment income.

Business Growth

FY 2009 (ended September 30, 2009)[2]

  • The company incurred a net loss of $338 million for the period, compared to a get of $979 million in the previous year.
  • Net sales fell 25% to $28.5 billion. Sales fell in all of the company's segments with the automotive (-34%) and power segments (-31%) being hit the hardest.
  • Sales in the Automotive segment fell by more than 25% in all three of the company's geographic regions, with North America suffering the largest loss (-31%).

Trends and Forces

Decreased automobile sales result in decreased sales of Johnson Controls' automobile interiors

In 2009 U.S. sales of automobiles fell to 10.4 million new cars, making it the worst year in terms of car sales in 27 years.[3] The economic slowdown and the instability of the Big Three Automakers is making is more difficult for people to buy cars. When consumers purchase fewer cars, automobile companies buy less interior products from companies like Johnson Controls as they decrease production to meet lowered demand. Despite attempting to minimize the effects of decreased automobile demand by negotiating contracts, Johnson Controls' Automotive Experience revenues decreased by $6 billion dollars between 2008 and 2009.[2]

Exchange Rates resulting in a weak dollar boost Johnson Controls' International Revenue

Because Johnson Controls reports their revenues in U.S. dollars but does 52% of their business outside of North America, it is exposed to fluctuations in exchange rates. If foreign currencies appreciate, the dollar value of Johnson Controls' international revenues increases. [4] In 2009, the unfavorable impact of foreign currency translation was -$2.1 billion.

Competitors

  • Ingersoll-Rand Company (IR) supplies its customers with climate control, industrial, and security products and services. The company's climate control operations, including Trane, compete with Johnson Controls' Building Efficiency products and services.
  • Siemens AG (SI) offers it's customers products and services based on its expertise in electrical engineering. Siemens competes directly with Johnson Controls' Building Efficiency products and services through its Siemens Building Technologies brand.
  • Honeywell International (HON) provides customers with products and services including aerospace products, building products and services, turbochargers, and chemicals. The company's building products and services compete directly with Johnson Control's Building Efficiency segment.
  • United Technologies (UTX) provides technology driven products and services to the building systems and aerospace industries. The company also owns the Carrier Corporation, which competes directly with Johnson Controls' Building Efficiency operations.
  • Lear (LEA) provides automobile manufacturers with seats and electrical distribution systems. The company's seats compete with the seats offered by Johnson Controls' Automotive Experience segment.
  • Magna International (MGA) designs and manufactures automotive assemblies, modules and components such as seats, interiors, metal body systems and metal chassis systems. The company's seats and interiors compete with those produced by Johnson Controls' Automotive Experience segment.

References

  1. JCI 2009 10-K pg. 2-3 and 22-23
  2. 2.0 2.1 JCI 2009 10-K pg. 19
  3. The Truth About Cars "U.S. Car Sales In 2009: Worst in 27 Years" 5 January 2010
  4. JCI 2009 10-K pg. 6
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